here. that's basically only true because free trade agreements that we have around the globe in last 20 years. it really shows how free trade fosters growth. >> just to close up, i would ask each of you to think through and give a couple comments on what you expect the world trade to look like in next year or two and what you would hope to see. what are the great opportunities, the great risks and the most likely outcomes. the things that you would expect to see out of the european and pacific agreements. >> we have high hopes to see the deal on tpp soon and ttip right

behind that. then with the job creation that we are all lacking, even at this point in asia, europe and the u.s., i would expect to see the benefits of that a year to two years later as we're starteding to see with south korea and colombia today. it it doesn't take long to open the spigot once those tariffs come down. i would be pretty optimistic that it would help job growth and gdp growth in all three zones, but particularly this one. 95% of our consumers are outside this country. we have to learn to deal with that. >> governor? >> i mean directly, i don't have the number on the pacific, but with the ttip agreement, we think it it will go up about $2 billion, which is a lot. i think the other thing is you have to look at context in what's happening in the broader

market. there are some things working in our advantage. energy costs in the u.s. are going down. that's not true in a lot of other countries around the world. we can take advantage of that. the logistics costs of transferring goods are being a bigger piece of something relative to labor piece of that good. we can take advantage of that as well. i think the market in so many ways is turning to our advantage right now. and in my mind, it would be a shame if we didn't create those additional jobs because of not having these agreements done. >> we should always keep in mind tpp or ttip free trade supports growth. it supports new jobs, foreign investment, innovation, so in the end, the consumer benefits from all of that and creates

jobs and in a world of free trade, there will be production moving to those countries where there is free trade and free trade will always foster exports. >> what are we going to hear and what would you like to hear? >> i'm very optimistic. i share the optimism about where the u.s. will be in this global trading system. where we look around the world including africa, asia, in parts of latin america, there's a real movement towards recognizing that opening markets provided you're doing it in the right way, opening markets can drive growth, innovation. we look at what the pacific alliance is doing. what our partners are doing in africa, some of the leading reformers in african countries. there's a desire to make sure trade is playing a role, that investment is playing a role in investment in their development.

and the u.s. stands to benefit hugely from the shift in the global economy provided we can do the things here. our biggest risk is our political risk. it's getting our fiscal house in order, comprehensive reform done, it's getting these things on trade through our congress as well. starting with trade promotion authority. every person has had since 1974. also tpp, the other things we need to do to make sure that we're at the center of this network of agreements that together with our legal system, our education system, our access to energy can make this really the driver of the whole exports. the platform that everybody wants to be in. that to me is a great potential for the united states economy and for job creation and growth here at home. >> with that, we'll close down. thank you so much for all these thoughts. well done. [ applause ]

on tuesday a hearing on the u.s. response to typhoon haiyan in the philippines. the senate foreign relations subcommittee on pacific affairs will hear from representatives live at 10:30 a.m. eastern here on c-span 3. two senate banking subcommittees are taking up virtual currencies in a joint hearing today. the hearing will examine the future and ways to protect consumers. you can watch the hearing live starting at 3:30 p.m. eastern here on c-span 3. now a look at the economic impact of the 2008 financial crisis. former treasury secretary hank paul son and former obama administration senior adviser david axelrod took part in this event hosted by the university of chicago paulson institute. it's just under an hour.

♪ >> so i have been keeping a list of my top favorite lines from today's talk. i'm sure you all have your own but here's my best attempt at david letterman. number three, if we wanted tarp to be popular, we shouldn't have made it a four-letter word. number two goes to barney frank. things would have been a lot worse without me. and number one has to go to larry summers. anyone who speaks with complete confidence about things is a complete fool. so there have been no shortage of people speaking their minds today. hank, i wanted to start with you. what did you hear that made your blood boil? or what would you like to add to? >> right. because you know, my blood doesn't boil. that happened, you know, three

or four years ago and five years ago. but the one thing i'd like to add to were a couple comments made about capital that were related. larry summers saying it was obvious the banks were undercapitalized, they should have raised more capital or the regulators should have forced them to raise more capital, and then people saying there should have been tougher compensation restrictions on the banks going along with t.a.r.p. because those two problems are related and i think it comes from a bit of a misunderstanding of what we did with our capital program. but let me begin by saying as mervyn king said, banks don't want to be stigmatized. they don't want to stand out. so early in the crisis, 2007,

with he had three banks that had trouble, were forced to go and raise equity. and those were merrill lynch, morgan stanley, and citigroup. so they were stigmatized. and larry is very right. he was among the first to be coming to me and saying the banks are undercapitalized, the banks are undercapitalized. i knew they were undercapitalized, but it was very, very difficult to get them to raise capital because they didn't -- during a crisis no bank wants to be the tallest midget. they're all -- every bank wants to be the tallest midget. everyone's afraid to raise capital. so we pressed them very, very hard. larry was slightly wrong because we got lehman to raise equity capital twice after bear stearns went down.

we pressed wachovia to raise capital. the ceo told me i can't raise equity because it will stigmatize me but i'll do a preferred. but the -- and no regulator was in a position where they could say to some bank you need x amount of capital, you've got plenty of capital, you don't have enough, because they just didn't have the capacity to do that and they didn't have the knowledge and the leverage was hidden. so this gets to our capital program and why we designed it the way we did. our capital program was totally different than what the europeans did. it was different than what had been done historically, which is nationalize failing banks as they go down. what we wanted to do was get out quickly and put capital broadly into the system. the only way we could do that was on a voluntary basis.

just imagine, i took plenty of criticism. one bank didn't want to take the, quote, voluntary capital when we encouraged them to do it quickly. so we got out quickly, we put capital in, and i think that is why the stress tests worked in america. i think the stress tests were a logical extension of the capital program. they were eager to pay back the capital. the regulators had the tools, and we had a capital -- we had a system that was more capitalized. but we could not have done that if we put strong compensation, restrictions on the banks. but if we'd done that we wouldn't have been able to go out broadly and have banks custom into that program. as they're failing, that's a different matter. and as larry pointed out, when you look at what happened with fannie and freddie and some others, there were some real restrictions. >> david, even if you agree with the notion that it was

impossible to put compensation restrictions on the banks, what was it like to have to manage through that? >> oh, it was fun. well, first of all, before i answer the question, let me say how much i appreciate thank and this partnership that we put together around this event. before this our greatest collaboration was sharing a parking lot. so now we've done this and i hope it's the first of many joint programs that we can do. and i thank all of you hardy souls who are still here at the end of the day. it's been a great day here. and i should mention that bethany was a fellow at the university of chicago institute of politics last spring. and i think there are plenty of folks here who can attest to what a great contribution she made there. having said all that, you know, i want to actually take your first question and adapt it to

your second, which is i too have a high boiling point. i've been in politics all my life. so you have to. and i think we've had great discussions. it's more the omission of part of this story that i think -- somewhat bothersome. and christoph alluded to it at the end. there was an overlay on this crisis, and that was the long-term economic trends that have sort of marginalized a lot of people in the economy, flattened wages, wage growth, and you know, that has created a lot of tension among middle-class people and people aspiring to be middle class. the median wage today is $5,000 less than it was a decade or so ago, and that's after some recovery during this period since the crisis. and it's translated into a tremendous amount of anger and mistrust that is -- we're celebrating the recovery of the financial sector from the precipice, and hank and many others but hank in particular deserves credit for what he did

in that moment. but the economy itself has a long way to go. people who lost their homes and their jobs are still suffering with the consequences. and it translates into numbers like these. by a 2-1 majority -- 2-1 people believe that the bailout was a bad idea. by 4-1 they feel reforms have been inadequate. by 4-1 they think wall street got off easy. 2/3 think this could happen again. 74% believe the stock market has partially recovered. but 54% believe household incomes have hardly recovered at all. and 52% feel the job market has hardly recovered. and then finally, 71% of respondents believe government policies following the recession

have done nearly nothing for the middle class, but 69% think those same policies have been of great help to banks and other financial institutions. neil said something earlier on the political panel, that the steps that were taken to stabilize the financial industry were absolutely necessary but they violated some fundamental values that we share. there's this notion that you behave responsibly and then you're accountable for the mistakes you make, for your failures. they feel -- most people feel those are the rules they live under. so the concept of bailouts is offensive to them. and so when you overlay this issue of executive compensation, that further infuriates them because not only do they think people are getting bailouts but

now they think some of the people who were culpable are actually getting rewarded for bad behavior. and it fundamentally violates their sense of right and wrong. so it's contributed to the jaundice that we see. so yes, it was a difficult issue to manage, and i think it -- you know, all of this continues to be a festering sore in our kind of social fabric. >> i agree with everything david said right there. when you've got a bug ugly problem there's not a perfect solution. i might have liked to see greater curves on compensation go along with the capital program but then we wouldn't have had the capital program we wanted. >> let's talk about compensation for a minute. in the documentary you referred to the bonuses as sheer cheekiness, which i think is a phrase that's great.

but writ more large i've heard the argument that for all the fixes we've put in place to make the system safer if you don't fix the most important thing, which is incentives, you don't have a really fix. and do you think that we've fixed the system of incentives? and do you think that that's the right thing to be looking at? >> well, bethany, first of all, i agree that the public is very angry about bonuses. and i did say, because i was -- i was frustrated that after all the government had done that the bonuses were as high right after the bailouts. i thought that showed an incredible lack of awareness of -- and lack of gratitude. now, in terms of the incentives i do believe contributing to the crisis was -- were the

misincentives out of compensation. when you give a trader -- pay that trader a percentage of the profits he or she makes, and of course if the institution fails, you know, there's very little recourse. that's going to make people angry. it gets back to david's basic point that the american people -- i don't think we'd ever want them to think bailouts are a good idea. people think that if you take risks you should do well but if you lose you should bear those losses. but i think a lot has been done to deal with the misincentives in compensation. a lot has been done in terms of the form in which the compensation is paid.

i'm a big believer in the clawbacks. so i think a lot has been done for that, to deal with that. and i don't want people to focus on that to the extent you ignore the other issues because i'm right where mervyn is, that the most important thing we can do going forward is make sure the banks have plenty of capital. and even more importantly, liquidity. >> i want to come back to capital and liquidity, but just to stay on the crisis for a minute, one of the things you've talked about is continuity. and barney frank made a point today about how many important decisions were made during the transition period. so talk about that a little bit, about this idea that continuity between administrations was important. >> well, i think it was critically important. and you know, i'm an unabashed fan of tim geithner because tim

was right there when he was president of the new york fed, with ben bernanke and with me. and the fact that president obama picked him as his treasury secretary. i think it was a huge statement of continuity. and then what i liked was i -- that the capital markets' stabilization programs -- there are plenty of differences between administrations. and the obama administration did the stimulus program. i'm not an economist. but i've got to tell you i was part of -- a big part of the bush administration's stimulus program that didn't work quite the way we wanted it. and i was hoping for a stimulus program and a big one and they

did the stimulus program. and they did -- worked on the dodd frank regulation. and they managed the capital markets stabilization programs extraordinarily well. but i believe that when president obama picked him as his treasury secretary i think that was a big step toward sticking with the capital market stabilization programs that i think there was a real continuity. across the board. as i said, the stress tests were a logical extension of the capital program, that 75% of the t.a.r.p. dollars were already committed. 95% of the programs were already in place. again, president bush was able to -- i just don't think he begins to get enough credit for his view. for the better part of a year i brought him bad news after bad news and he never once said look at the bulls. can you imagine how much he must have liked -- and i'm being facetious here. making the auto loans. or bailing out bankamerica, you know, on the night before he was

-- the day he gave his farewell address to the nation we were putting capital in bankamerica. and a lot of his political advisers were saying how can you in bank america. a lot of his political advisers were saying, how can you be doing this? it was going to drown out his message. boy, not a word of that from him. you have to do whatever it takes to save the economy. >> i actually think it is a mark of a healthy democracy, that two leaders were willing to share the stigma of the unpopular programs. i do remember, and i mentioned this last night to some folks -- the day we were meeting, september 14th, 2008, the day before lehman went down, we had a strategy meeting in our campaign headquarters. by the way, the reason we're

having this strategy meeting was because for all of the backward looking that we were on a glide path, there was some concern about what was going on at that particular point. senator mccain had gotten a little momentum. at the end of it, senator obama said, i have -- i spent an hour on the phone last night, he 208d me about something that's going to happen overnight, that's going to have an adverse effect on markets. and i told him, and it's going to require some serious action. and i told him that i would play this straight. and do everything i could to help in that situation. that's what he did. his admonition to us was, we want you to do the same. good government is good politics and this is one of those times. as it turns out, i think it was good politics because the

solidity he showed during that period rebounded. in a sense it was the first presidential test. that crisis of -- and the two candidates were tested. and so -- and i think he held up well, and he did throughout those early months when we were essentially a triage unit. the economy was in free fall, the president made a series of decisions, each of which were as unpopular as they were necessary. and as hank suggests about president bush. i was the one who was the keeper of the polls, and each time i would say, well, you know, even in michigan, people are opposed to the auto bailout, and each time he listened respectfully, and then ignored me, and i always say that i like him so much, because he listens to me so little. and this was -- i think that the country was well served by the willingness of two people who were willing to make those kinds of decisions.

>> i say this, i would give the due to john mccain. it was -- i was -- it was in some ways more of a challenge for me to communicate with him, than with president -- or barack obama at the time candidate obama before the election. but as i look back on it. if either one of the political candidates had come out against what we were doing, or come out against the tarp, we would have been defenseless. and it would have been easier for john mccain to demagogue it. i do think he was behind and the weak economy was a -- you know, by and large a benefit to barack obama.

i was even more uneasy during the election about john mccain. and he never -- he was ultimately supportive of the tarp, and never came out against what we were doing although i admit i had a few sleepless nights about it. >> for all the talk about continuity and alignment do you think that came out in the right place? >> i think that -- the decisions that tim geithner made proved out. i think the aggressive stress tests, the compelling recapitalization, those were the right answers. i have to say he did it under enormous stress himself.

some people may remember in the early weeks -- washington always likes to throw a body or two out when things aren't going well, and tim was the first guy they had -- as we say in chicago, fitted for concrete shoes. and i'm just trying to make the top three. >> getting close. getting close. >> and, you know, he was under enormous pressure. and he was very deliberate and thoughtful about how he approached it, and yes there were others urging a different course. and i think he did make the right decisions and he deserves a lot of credit, because he made it under the most adverse kind of political circumstances. >> so the previous panel talked a fair amount about complexity, and you have a line from your documentary about complexity being the enemy of transparency and not a good thing for the financial markets. for all the talk about capital

being the solution to making the system better, how big is complexity? >> complexity is another huge issue. it's hard to be against innovation. i think you can have too much innovation in finance. it's hard to come up with rules to outlaw against the complexity and innovation. so -- but it's -- it is the enemy here. and so to me, my solutions are very simple. if an instrument is too complex to put on an exchange or a central clearinghouse or it's transparent, put a big capital charge against that.

to all those that say that will hold back growth, i say, what do you think just happened to us? in terms of it, so again, i'm for transparency, i do agree with a comment i heard on the panel. the panel with the industry leaders and all that, where they explained that just going on an exchange raised other sets of issues. you're looking at technology and think the capital backing of that exchange. and particularly, when exchanges are for profit exchanges. and so i do think there are other things we need to look at, there's a temptation to fight the last war and not look ahead to the next one, but by and large i'm a fan of transparency and i think capacity is the

enemy, and complexity makes transparency very difficult. >> can i just add one thing to that, which is, we live in times in which we are both blessed and burdened by extraordinarily rapid advances. technological advances. these innovations come at warp speed, and i think one of the challenges is, we want sufficient oversight to protect the larger system and our economies from the kind of dislocation we've gone through without impeding the up side of that innovation. i think that's going to continue to be a challenge, because these cycles of innovation are just going to increase in their speed and their complexity. >> too big to fail is hanging over the resolution. there's the ability of regulators to wind down a

failing firm, you lived through the crisis, the problem isn't when one firm fails, it's that in a crisis, multiple firms fail all at the same time. even if resolution authority works for one firm, how does it work for multiple failing firms all at once? >> it depends how it is used. david mason said something i agree with. he worked hand in glove with me at treasury. what he said is, if you've got the right authorities, no institution needs to be too big to fail. but in the midst of a crisis, almost any institution of size is too big to liquidate quickly. and so really the -- i believe that dodd frank gives regulators, if they have the